Thursday, September 15, 2011

BAT, JTI down on concerns on hike in tobacco duty

KUALA LUMPUR: Shares of BRITISH AMERICAN TOBACCO (M) [] Bhd and JT INTERNATIONAL BHD [] fell at midday on Thursday, Sept 15 on concerns of a hike in the tobacco duty in the Budget 2012 proposals which will be unveiled on Oct 7.

At 11.56am, BAT was down 56 sen to RM43.70 but in thin volume of 1,600 shares done while JTI lost 15 sen to RM6.45 with 13,000 units transacted.

The FBM KLCI was a marginal 0.55 of a point up at 1,438.16 after closing at a 53-week low on Wednesday. There were 232.03 million shares done valued at RM370.32 million. There were 224 gainers, 241 losers and 272 stocks unchanged.

OSK Research said it expected a moderate hike in tobacco duty in the upcoming Budget but it believes that the breweries will be spared.

'We are NEUTRAL on tobacco but OVERWEIGHT on breweries. We believe that the high illicit trade and diminishing duty collection in the tobacco sector make a strong case against a drastic increase.

'We prefer BAT to JTI as the former is less exposed to VFM brands which are more price elastic and prone to substitution. For the breweries, we do not see a hike since beer duty is already the 2nd highest globally while consumption is comparatively low. Our top pick among the breweries is GAB given its more defensive PROPERTIES [],' it said.

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